Property Grunt

Friday, October 30, 2009

Happy Halloween

Tuesday, October 27, 2009

Things that make you go: WTF!

I am a man that respects perfect credit especially after seeing rental deals going up in smoke because a client's credit sucked a$$. When it comes to my own credit, I am insane. I am very selective in what I use it for because I know that credit card companies are compiling a psychological profile based not only on paying my bills on time but also on my consumer purchases. When I can, I pay in cash.

By ALEXIS CHRISTOFOROUS, CBS 2 HD News NEW YORK (CBS) ― Loraine Mullen-Kress carries a Bank of America credit card and religiously pays off her balance.

"Flawless credit," she boasts.

Yet now, her good credit habits could cost her. Earlier this month Bank of America started notifying customers like Mullen-Kress that they will be charged a new annual fee of $29 to $99.

"There is a big segment of their population that they will have never made money on, which is people who pay their bills on time every month," said Ben Woolsey, Director of Consumer Research at CreditCards.com.

Bank of America said in a statement: "At this point we're testing the fee on a very small number of accounts and haven't made any final decisions." Citigroup is also trying out an annual fee with some card holders, and analysts expect more banks to follow their lead.

The banks are starting to charge fees to reliable customers in response to a slew of new credit card industry regulations that will limit when banks can hike interest rates. Cardholders who get a new annual fee notice in the mail will be in a no-win situation.

"They can either pay that fee or they can close the account, and if they have had the account for a while and they close it, they are potentially going to hurt their credit card score," said Woolsey.

Analysts say right now the banks are trying to figure out what their customers will tolerate. Many say they'd cancel cards with a high new annual fee.

"I think it is really bad. They're encouraging you to be a bed creditor or not have good credit," one New Yorker told CBS 2.

Said Mullen-Kress: "An annual fee would not be tolerated."

Credit card companies call the fees an experiment. Whether they stick depends on whether customers are willing to pay for something that's been free for so long.

If your credit card company does start charging you to carry its card, call and complain. If you have a good credit score and you've been a loyal customer, they may be willing to waive the fee to keep your business.

You may also see annual fees go up on cards that offer rewards like miles and hotel rooms. That's when y ou'll have to weigh whether the rewards are truly worth the higher fee.

Banks are on the never ending search for more revenue streams because once the credit card laws go into full effect, the money tap will be turned off.

Which brings me to this scene from Goodfellas that I often refer to.

What happens when all the hogs are slaughtered? Where does one go when there is no more blood to suck? What do you do when there is no place to bust out?

They go after us.

Banks have no where else to go. The credit markets are still in a coma and with TARP, the Federal government has every bank's nuts in a vise.

It is not ironic, it is absolutely twisted that banks are even thinking of making us, the customers that honored their words, pay for being honorable.

But you know what? Let them do their f**king worse. Slap with me as many fees as you f**king like. Because I will cut up the plastic. I have always been a cash and carry man and I have no problem with returning to my roots.

REYKJAVIK, Iceland (AP) -- The Big Mac, long a symbol of globalization, has become the latest victim of this tiny island nation's overexposure to the world financial crisis.

Iceland's three McDonald's restaurants -- all in the capital Reykjavik -- will close next weekend, as the franchise owner gives in to falling profits caused by the collapse in the Icelandic krona.

"The economic situation has just made it too expensive for us," Magnus Ogmundsson, the managing director of Lyst Hr., McDonald's franchise holder in Iceland, told The Associated Press by telephone on Monday.

Lyst was bound by McDonald's requirement that it import all the goods required for its restaurants -- from packaging to meat and cheeses -- from Germany.

Costs had doubled over the past year because of the fall in the krona currency and high import tariffs on imported goods, Ogmundsson said, making it impossible for the company to raise prices further and remain competitive with competitors that use locally sourced produce.

A Big Mac in Reykjavik already retails for 650 krona ($5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona ($6.36), he said.

That would have made the Icelandic version of the burger the most expensive in the world, a title currently held jointly by Switzerland and Norway where it costs $5.75, according to The Economist magazine's 2009 Big Mac index.

The decision to shutter the Icelandic franchise was taken in agreement with McDonald's Inc., Ogmundsson said, after a review of several months.

"The unique operational complexity of doing business in Iceland combined with the very challenging economic climate in the country makes it financially prohibitive to continue the business," Theresa Riley, a spokeswoman at McDonald's headquarters in Oak Brook, Illinois, said in a statement. "This complex set of challenges means we have no plans to seek a new partner in Iceland."

McDonald's, the world's largest chain of hamburger fast food restaurants, arrived in Reykjavik in 1993 when the country was on an upward trajectory of wealth and expansion.

The first person to take a bite out of a Big Mac on the island was then-Prime Minister David Oddsson. Oddsson went on to become governor of the country's central bank, Sedlabanki, a position that he was forced out of by lawmakers earlier this year after a public outcry about his inability to prevent Iceland's financial crisis.

Lyst plans to reopen the stores under a new brand name, Metro, using locally sourced materials and produce and retaining the franchise's current 90-strong staff.

Ogmundsson said it was unlikely that Lyst would ever seek to regain the McDonald's franchise with Iceland still struggling to get back on its feet after the credit crisis crippled its overweight banking system, damaging the rest of its economy, last October.

"I don't think anything will happen that will change the situation in any significant way in the next few years," Ogmundsson said.

It is not the first time that McDonald's, which currently operates in more than 119 countries on six continents, has exited a country. Its one and only restaurant in Barbados closed after just six months in 1996 because of slow sales. In 2002, the company pulled out of seven countries, including Bolivia, that had poor profit margins as part of an international cost-cutting exercise.

Monday, October 26, 2009

The tragedy of Mont Parnasse

The closing of diners has been a sore topic of late. I would like to examine a particular diner outside the boroughs of New York City.

Mount Parnese was not just a diner but also a place where those with newly granted licenses and cars could go for a meal AKA high school students. Think of it as Arnold's for the all the high schools in the area. There is even a Facebook Page dedicated to it. During my school days, I recall going their once for lunch in my junior year with my chemcom class.

So what does the diner look like now?

Hello progress!

The story behind this change from historic diner to bank is a common one. Now I am unsure if Mont Parnasse owned the property or they leased it. Either way the owners were given an offer they could not refuse and decided to pack it in with the enormous check clenched in their fist. It was one of many significant changes that occurred on Central Ave during the last real estate boom.

However, it was only the beginning for Mont Parnasse when they moved their operations a couple of blocks down on the Central Ave strip.

Just like old times!

That's what I thought. Then I went back and realized it was definitely not like old times. Food was meh and the service was below meh but their prices had gone from meh to "I am paying how much for matzoh ball soup?" It appears the rest of the customers felt the same way and decided to take their business elsewhere. And diners are just like armies. They march on their stomachs and bring their pocket books with them.

The Mont is now out of business and I learned what also contributed to their demise is that besides jacking up prices they got rid of all of their old staff and got newer, younger and cheaper labor.

Mont Parnasse is also a textbook case on the subtleties of parking. They had ample parking however it was on a hill while their last location was completely flat. What also did not help was that the new location was right next to a busy intersection.

You see, besides kids with learner's permits, Mont Parnasse was a favorite hangout for the geriatric. The elderly are not big fans of hills because it requires more effort for them to maneuver. Which is why Arizona and Florida are a huge part of the retirement scene. The elderly also like to take their time when they enter and exit a parking lot. The amount traffic at that location probably increased their stress levels. The elderly also do not make a lot of money since they are retired. These barriers of entry are unacceptable for the less physically inclined who are on fixed incomes.

What also did not help was that the new location was known to be a bit of a black hole for restaurants. The last place that opened there also suffered a similar fate.

So should Mont Parnasse stayed at their old location? Who is to say that they would have still been around if they decided to stand their ground? Maybe they would have survived the recession. We can only speculate. Regardless, Mont Parnasse still lives. As a facebook page.

Friday, October 16, 2009

Captain Lou's final voyage

One of the two staples of my childhood were Saturday morning cartoons and WWF in the on Saturday afternoon. Captain Lou Albano was one of the few figures who was present in both mediums. Forgive me for being nostalgic but after hearing of his passing, I can't help but look back.

I never met him but I knew his niece as a kid and if that is any indication of what type of man he was I am not surprised he was regarded as a sweet joyful saint of a man.

Thursday, October 15, 2009

Pay up.

Okay. He's alive. Thank God. For a couple of minutes I thought of the worst. But just from the body language alone, you can see it is going to be a rough couple of months for thsi family. The mother has her arms around her two older sons, the father does not have his hands around anyone and their smallest kid is standing by himself with a Jenny Slate face.

“We don’t charge lost people and we certainly aren’t contemplating passing on any of the financial aspects to the family,” he said. If the family has a hunter’s license or a fisher’s license, he added, then the authorities could recover some of the costs “through an emergency type fund that they give grants out of.”As for the question of criminal charges, Sheriff Alderden said this was simply a case of a boy hiding because he was afraid of being scolded, and that everyone involved was just relieved that he was found.“I was under the strong belief that the boy had fallen out of this craft by the time it had landed,” he said. “I was expecting the worst scenario and to have one come out so positive like this it’s overwhelming.”

No. This family needs to pay for the cost of this whole wild goose chase. First of all this could have easily been avoided if the parents had taken the proper precautions to secure the balloon. I mean for f**k's sake, a 6 year old kid was able to release the balloon, I can think of multiple ways of preventing this from happening and I know absolutely nothing about ballooning.

I recall incident when I was in junior high school when during a an after school rehearsal of the school musical somebody pulled the fire alarm.

The next day, our music teacher spoke to us and I still remember her words to this day."It could have been your house."

She explained to all of us that if a real emergency had actually occurred when the alarm was pulled, the consequences would have been disastrous.

What if a real emergency had actually occurred while this whole fiasco was transpiring? What if a life or lives were really in danger and desperately needed aid? There would be blood on the hands of these parents.

Compensating everyone is the least they can do.

When you are young, you do stupid things. Everyone can relate to that. That is why we have parents to ensure that we do not royally screw up.

UPDATE! Apparently it looks like this whole thing might have been a hoax.

Monday, October 12, 2009

Return of the Foot Clan

On June 28, 2008, I did a piece on the Vornado development or lack thereof at Harlem located at 125th street. My observations did not go unnoticed and was picked up by Curbed.

Then on April 26, 2009 Curbed reported that Vornado decided to put the kibosh on that project.

I recently noticed a minor yet significant change at the site.

October 2009

Do you see it?

Here is the picture from June 2008.

Do you see it now?

Last weekend I spotted a two man crew repainting the letters with blue paint which got me wondering why would they do that? The site does not belong to the New York College of Podiatric Medicine any more. These are my theories.

1. They sold the building back to the New York College of Podiatric Medicine and the school either plan on moving back or expanding their campus.

2. Because of the valuable exposure, the New York College of Podiatric Medicine paid some extra coin to ensure that the name of their venerable institution of tootsie maintenance is well advertised at the original location.

3. Vornado just wants to keep up appearances.

I say number 2. There is no market for any type of development on this site. However, Vornado probably paid an arm and a leg for the site so instead of cutting it loose in this buyer's market, they are going to hold onto it for as long as they can or at least until the next cycle which won't be for awhile. In the meantime they need to generate a cash flow to at least cover the costs of maintaining the property.

Wednesday, October 07, 2009

The Hideki Gondô rule

In the movie a Taxing Woman AKA marusa no onna. There is a scene where one of the tax agents sarcastically ask a very rich tax evader Hideki Gondô how does one become rich. He responds with the following:

To save money, you don't spend it. It's as simple as that. You give maybe $100 at a funeral, $200 at a wedding. That's not good. A million is nothing if you spend it. But even $100 is yours if you save it. Say you're trying to fill a glass with dripping water. When it's half-full, you're thirsty, so you drink. But that's stupid. Wait until it's full. But still don't drink. Wait 'til it brims over and lick it. That way you save the water and drink.

-Hideki Gondo

The New York Times article below demonstrates that a lot of rich people did not listen to this advice.

One of the big problems is how differently people within a family spend, save and invest money that has been managed as a pool for many generations. When the credit markets froze and the stock market tumbled, not every cousin agreed to tighten his alligator-skin belt. That caused friction.

Some family members with money in individual trusts are opting to go off on their own. The bigger issue is when families have to cooperate to run the business the patriarch set up.

In the past, family businesses and family wealth were commingled. If the business was struggling, the patriarch would often finance shortfalls. “Now the kids are upset about where the money is going,” said Holly Isdale, managing director at Bessemer. “Intrafamily dynamics are playing a bigger part in decisions.”

If the family put in place a strict estate plan, the children may legally own a good portion of what the patriarch made. And now they have choices to make that may go against his wishes. “These families have recognized that autopilot is not a good strategy,” said Amelia Renkert-Thomas, a lawyer with Withers Bergman.

In a previous entry I made the observation that family and money are combined, you have a very combustible situation. And right now forest fires are breaking out left and right.

One thing the group convened by Bessemer agreed on is that their clients were hesitant to buy commercial real estate. They fear that the value of it could collapse with greater ferocity than the housing market.

The logic behind this is that with everyone cutting back — companies laying off workers, consumers watching what they buy — there is less demand for office and retail space. If leases expire and are not renewed, building owners will have trouble making their loan payments. That, in turn, will affect the investors who bought the bonds secured by this debt.

Even those real estate owners who are doing well could be hurt. “A lot of this debt is short term and it needs to be refinanced, but there is no market for that,” Ms. Isdale said. Next year and 2011 are expected to be the worst, Ms. McCarthy said.

So while the super-rich bought properties on the cheap in previous real estate downturns, they now may be struggling with the financing on the ones they own and wary to add more, even at discount prices.

I make an effort to observe rich people, not because I have a lot of money but because whatever they do has an effect on their surroundings. Right now, depending on who they are, they are the most liquid demographic in the country, yet despite rock bottom prices for commercial real estate, they are not even touching it with a ten foot pole. And their actions further confirm the reports of the imploding commercial market.

NO MORE EASY MONEY One reason for the subprime mortgage collapse was that banks gave mortgages to homebuyers without verifying their ability to repay. The super-rich had their own version of this: the signature loan.

In this case, a person’s net worth would be verified but not, say, the value of the building she was buying. The feeling was if someone was worth $1 billion, she would have no problem paying back a loan for a $100 million office tower.

This gave the super-rich access to quick financing, for both hard assets like real estate and assets like securities. “There’s a realization that we can’t borrow any more to goose our returns,” Ms. McCarthy said.

Now banks want loans secured by a verifiable asset, and the super-rich are not borrowing as much. This has translated into a more conservative approach over all.

When I read this, I was like what the hell? Why would they even get involved in signature loans? The answer of course is OPM. The reason why a lot of rich people stay rich is that they are always using someone else's money. And when you are spending someone else's money, you are not spending your own. Just like those people who bought homes they could not afford, a lot of rich people have over leveraged themselves. And with the credit markets frozen, there is no place to go to stem the bleeding.

Even those real estate owners who are doing well could be hurt. “A lot of this debt is short term and it needs to be refinanced, but there is no market for that,” Ms. Isdale said. Next year and 2011 are expected to be the worst, Ms. McCarthy said.

So while the super-rich bought properties on the cheap in previous real estate downturns, they now may be struggling with the financing on the ones they own and wary to add more, even at discount prices.

Instead, super-rich families are focused on having cash on hand. One of the other uses of signature loans had been to pay for a lifestyle. Until a few years ago, many banks advised wealthy families to have 100 percent of their wealth invested to take advantage of the high returns across asset classes. If they needed cash, they could borrow at a low rate. It was easy, until it was not.

Now this is just bats**t crazy. Even someone who just watches Suze Orman knows that you never, ever play the eggs in one basket game. You make an effort to diversify and engage in asset allocation. You always spread out your money in your investments and you always have a significant chunk of it accessible to you all times in case of emergencies. As for the rich borrowing cash for their lifestyle purposes, that is no different than people maxing out their credit cards to live beyond their means. Even if they did not use plastic, they still lived a life on credit.

Unless it is for educational or business purposes, there really is no excuse for taking out loans for living expenses when you already have the money to cover your cost of living.

I was always thought the rich, the real rich, were smarter than the average bear. Not because they were more intelligent but they had access to the best financial minds in the world who would ensure they would be protected. That is obviously not the case. I think what has really hurt the rich is the people that were supposed to help them were helping themselves.

Remember this part:

Until a few years ago, many banks advised wealthy families to have 100 percent of their wealth invested to take advantage of the high returns across asset classes. If they needed cash, they could borrow at a low rate.

This is a f**king trap and here's why.

If you plunge all their money into an asset class that gives high returns, people who facilitate those transactions get a bigger piece of the action as opposed to putting your money into a much safer asset that has a lower rate of return. It is in their best interest for you to dump all of your money into that particular asset.

As for borrowing at a low rate in order to get cash, it doesn't matter how low of rate you get, you still have to pay for the service of getting that money. Wouldn't it make more sense to use your own money that is already collecting interest in a checking savings or money market account instead of borrowing it? Of course it is hard to get access to your cash if you plunge all of it into an illiquid asset like real estate.

Staying rich is not rocket science. You live frugally, you take care of the essentials, you don't get cowed into doing things that have no ROI and you give what you can to charity. And you do not take on unnecessary debt. But it does not mean you have to lead an unhappy life.

This isn't No Man's Land. This is Central Ave.

Central Park Avenue runs for eight and a half miles from the City of Yonkers through Greenburgh to White Plains. For years it has been considered Westchester's most aggressively commercial street. It is replete with large shopping centers, strip malls and individual stores, accompanied by large, garish signs and haphazard development.

This particular strip plays a key role in the commercial needs of the population and to say that it acts as the barometer of the local economy would be an understatement.

When it comes to real estate, I consider myself pretty jaded but some of the s**t I saw really took the wind out of my sails.

When I saw Cascade Florists vacant, my heart skipped a couple of beats. You see Cascade Florists was an institution on this block. It has been here since forever, well as I have long as I have known. As a business, it was as solid as they come or so I thought. I have no doubt that the economy has played a key role in its demise. Flowers are really not high on the list of essentials. And if you need flowers on the cheap, you just go to the A&P that is further south down Central Ave.

On the same block, you can see there are more vacancies.

I ate here for a family celebration once and the food was quite good. What sucked was the parking, which I will touch upon in a later entry. This place shutting down is not surprising to me since the restaurant industry has been getting ass raped recently.

More vacancies on that block.

Now this is really interesting.

This was actually an Exxon station. I know this for a fact because I used to get gas here all the time and I was completely surprised that not only had it closed down but it turned into a Gulf station. I did some digging and found out some interesting news about Exxon Mobil.

After a making copious amounts of profits in gasoline sales, Exxon Mobil has decided to get out of the service station business in North America. Already a transition has begun according to these articles.

Exxon won't exist anymore but Mobil will be around and will only be in the gasoline distribution business to service stations. I guess the best way to describe what they are doing is a reverse monopoly. They are giving up control of certain markets to their competitors which actually make sense. Service stations are real estate and with the current state of the market, it is in the best interest of the company to get out of the real business and focus solely on the distribution of gas to these service stations.

Which brings me to that particular service station. I suspect it went out of business is because customers freaked out when their exxon mobil cards did not work and it was not worth the aggravation, money and time to get a Gulf card. And the owner was already getting his ass whupped by the economy but when he saw a significant drop in profits, that is probably when he decided to throw in the towel.

I guess the gas sale didn't do the trick.

Any talk of recovery or that recession or depression is over does not jibe with what is really happening out there. Small businesses are getting clobbered out there because people are not spending money because there is no money nor is there credit.

I plan on more stomach churning coverage of the burbs. So keep the Pepto nearby.

Saturday, October 03, 2009

Roll Call:Symptoms of the economy

By now we have all heard about David Letterman's blackmail scandal involving an affair he had with an assistant. This is not news to me. It was very well known in entertainment circles that Letterman had a pencahnt for pretty young female assistants. Besides, show business is notorious for these types of extra curricular activities.MrWhat I find fascinating is the motivation behind Joe Halderman's actions.

He lives in Norwalk, Conn., in a house he purchased for $420,000 in 2004. It's unclear from public records available online what the mortgage on the house was, but according to the Norwalk Town Clerk's office, he appears to have taken out four mortgages since 2004—two from Coldwell Banker, one from Accubanc, and one from JPMorgan Chase. According to public records databases, the latter loan was a $50,000 line of credit he took out in February of last year.

Here's the culprit. It is his mortgage. The irony is that Norwalk is nowhere near the same level as Greenwich.

Halderman and his wife Patricia Montet were divorced in 2003; the litigation lasted five years and concluded in May of last year, according to the court docket. It appears to have been a messy parting: The docket contains orders for participation in a "parenting education program" and one motion for contempt of court. The New York Post quotes Montet's father—Halderman's former father-in-law, saying Halderman "was fooling around with a lot of women." According to TMZ, the settlement agreement required Halderman to pay $6,800 in monthly child support, an amount that was later reduced to $6,000. In 2003, the couple's credit care bills totaled $13,500. They have two children, one 18 and one 11. The Post, citing unnamed sources, says Halderman's alleged scheme was a bid to raise money for the child support payments.

And of course what does not help is that he is divorced and has child support spayments up the wazoo.

In the end, many of those who know Mr. Halderman offered a psychological explanation--perhaps it was a matter of personality. After all, what sometimes makes a great war producer is, in part, the ability to stride into dangerous situations without a flicker of self-doubt or anxiety about the future. A willful belief that everything will work out, despite the high-risk of danger.

Perhaps it was that same sense of confidence and invincibility that allowed Mr. Halderman to try and allegedly blackmail the late night star of his own network, despite the ostensibly terrible odds of pulling off such a crime.

"It's arrogance," said one former CBS staffer who knew Mr. Halderman. "After you've been in so many war zones and escaped, maybe he feels invincible. I guess it's a chicken and egg thing. Do you have that personality to begin with? Or do you get more and more cocky as time goes by?"

For those of you considering a career in the media, particularly in the tv industry, please be aware that the pay sucks unless you have your own production company or create and distribute your own content.

Also be aware that people like Halderman are a dime a dozen in this industry. Their egos are so enormous that it requires porter to carry them. They are allowed to run rampant because they are the little engines that run the media machine. Despite the key role they play, they do not usually cash in the big bucks because they are more interested in bragging rights than money and also media is notorious in keeping their overhead as low as possible.

I knew of one oompa loompa who thought he was the hottest thing since Don Hewitt. He told everyone about his upcoming projects which never came to be. He was one of those poseurs that whenever he talked about tv shows he acted like he created them.

Now there has been a ton of chatter about how the NYC real estate market is stabilizing.